Airlines flex pricing power, signaling higher fares in 2025
Higher airfare is in store this year as strong demand, even during the dead of winter, and limited capacity growth prompt airlines to flex their pricing power.
Higher airfare is in store this year as strong demand, even during the dead of winter, and limited capacity growth prompt airlines to flex their pricing power.
Fare-tracking platform Hopper this month said domestic “good deal” U.S. airfare in January is at $304, up 12% over last year, with more domestic flights going for more than they did last year through at least June.
Late deliveries of new aircraft from Boeing and Airbus, air traffic constraints and financial pressures have limited airlines’ ability to expand flights, which has pushed fares higher. Spirit Airlines, which filed for Chapter 11 bankruptcy protection in November, was the most dramatic case and has slashed its flights to cut costs.
American Airlines on Thursday forecast a jump in revenue of as much as 5% in the first quarter over the same three months of 2024, while capacity will be flat or even down as much as 2%.
“We do expect airfare to come up,” American Airlines Chief Financial Officer Devon May said in an interview. The airline forecast a wider-than-expected-loss for the first quarter, however, disappointing investors as it expects an increase in costs, such as higher wages from new labor contracts signed last year.
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